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In this screen, we turned our attention to low-risk biotechnology stocks that pay dividends to shareholders. In addition, we predict that these companies will continue to pay annual dividends and will likely increase these payouts in the coming 3- to 5-year period. Although dividend payments and low-risk attributes are anomalies in the biotechnology world, we have found two equities that match such criteria.

We began our search with stocks that pay dividends, and have a projected compounded annual rate of growth of at least 5% over the next 3 to 5 years. Although the current yields for both these companies are under the Value Line median of 2.3% (as of the week of this report), they have consistently increased their annual dividend payments and are expected to continue to do so.

Our search was further narrowed to stocks with Safety ranks of at least 2 (Above Average), and Financial Strength Ratings of A or better (B+ is Average). Furthermore, both of these companies obtained nearly perfect scores for Earnings Predictability. Companies whose shares earn high marks for these metrics generally will fare better in volatile markets than the typical stock under our review. Lastly, to reduce the risk of underperformance, we limited the selection to issues ranked 3 (Average), or better, for relative price performance over the next six to 12 months.

The list of biotechnology stocks that possess the aforementioned conditions are few and far between. Of the 18 biotech names covered by Value Line, only two stocks made the final cut, Amgen (AMGN) and Techne (TECH). They are not only judged to be safer than most in the volatile Biotechnology Industry, but also possess the financial means to continue to pay dividends for the foreseeable future. As usual, we advise investors to carefully review both full-page and supplementary analyses in our Ratings & Reports before making commitments to any of the equities on the list of stocks below.

Amgen

Amgen is the world’s largest independent biotechnology company. It discovers, develops, manufactures, and markets human therapies through the utilization of living organisms found in the natural environment. Amgen has a formidable portfolio of commercialized products that target several different grievous illnesses. Some of these drugs include: Aranesp and EPOGEN, (used to treat anemia in patients with chronic renal failure) and Neulasta and Neupogen (which fight infections in patients undergoing chemotherapy). The company also partners with several smaller biotech firms on other commercialized products and has an active clinical development pipeline. In 2011, Amgen spent $3.2 billion, or 20.5% of sales, on research and development endeavors.

This biotech stalwart is well positioned to deliver stellar top- and bottom-line growth for the foreseeable future. Amgen’s well-stocked portfolio of therapies and improved pricing provide potential for continued growth. Timely spending and ongoing share repurchases, along with higher revenues from market-share gains are also contributing factors to our optimism. Furthermore, the company has intensified its R&D spending and currently has numerous Phase III trials underway. For example, it is working on a drug that could potentially lower LDL or “bad cholesterol” as well as another clinical trial for an osteoporosis drug. Although commercial success is not guaranteed, the company has already demonstrated its ability to bring a drug to market, and we are optimistic that it can discover additional therapies in the 3- to 5-year time frame. Another growth catalyst for the company is international expansion, and particular attention is being paid to emerging markets. For instance, recent acquisitions have allowed Amgen further access to Turkey’s patient population.

All told, these high-quality shares are a solid addition to conservative portfolios. Momentum investors may also want to consider these shares given their Above Average Timeliness rank of 2 for year-ahead price performance. The company’s gilt-edged financials are a good indication that it is well positioned to explore further growth ventures. Also, the dividend payment appears to be secure, given the company’s strong financial position and commitment to returning funds to shareholders.

Techne Corp.

Techne Corporation develops, manufactures, and sells biotechnology research and diagnostic products, as well as hematology calibrators and controls, worldwide. The Company’s Biotechnology segment offers proteins and antibodies which allow researchers to detect human and animal proteins. The study of these compounds enables researchers to analyze various biological functions that can help in disease detection. Techne’s Hematology segment provides numerous calibrators which are used as proficiency testing tools by laboratory certifying authorities. In fiscal 2012 (year ended June 30, 2012), the company spent 9% of its total sales on R&D efforts.

The company continues to encounter near-term challenges such as foreign currency translation losses and curtailed spending from particular academic and industrial customers. Constrained spending is likely the result of concerns over budget cutbacks. Once these budgets are decided, pent-up demand should help alleviate these worries. In addition, the company is poised to benefit from higher patient hospital admissions owing to the HealthCare Reform Act, which seeks to have all Americans medically insured. Furthermore, the company is pursuing expansion through ongoing research endeavors as well as greater geographic penetration.

Techne appears to be committed to giving back to shareholders. Despite drawbacks, the company recently increased its quarterly dividend payment by 7%, to $0.30 per share. The balance sheet is solid, with ample cash and no debt obligations. Therefore, we anticipate that the company will continue to increase its annual dividend payments.

At the time of this article's writing, the author did not have positions in any of the companies mentioned.